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March 23, 2022

Shrinkflation: Silently fuelling the rising cost of living

Shrinkflation is not a product of your imagination. Jaffa Cakes did used to come in a box of 12; Walkers’ multipacks had more packets of crisps in them; toilet rolls had more sheets of tissue; cereal boxes were larger; the gaps between Toblerone’s chocolate peaks were smaller.

Likewise—bags of Maltesers, Minstrels, and M&Ms really did used to be bigger. This is the result of ‘shrinkflation’, a contributor to the rising cost of living that deserves more attention.

These examples are only a small number of the culprits that have got away with shrinkflation.

What is shrinkflation?

Shrinkflation is when companies downsize their products but keep prices the same—and has been likened to hidden inflation. Behaviourally, consumers are more sensitive to price changes than quantity changes, and companies are exploiting this to pass the higher costs of production onto the customer. The Covid19 pandemic fuelled an assortment of supply chain crises concerning raw materials, packaging, fuel, trucking, and labour. Moreover, the ongoing crisis in Ukraine has led to skyrocketing fuel costs and rising costs for many other basic ingredients.

A deceptive and unfair practice

Companies have been known to justify shrinkflation with ESG motivations, as smaller goods can be transported in larger bulk loads, which can lower aggregate emissions and save fuel. They have also claimed that it is for the good of the consumer as smaller portions are healthier, and aiming to standardize product sizes across ranges can aid consumer choice and make it easier to compare between goods.

But no matter how companies label it, shrinkflation is effectively a price increase and is deceiving consumers. Passing on higher costs by changing the size of a product, whether with toilet roll or cereal, is not an immediately obvious change and requires the customer to proactively monitor the price per unit. Shrinkflation, therefore, affects customers’ ability to make rational decisions when shopping and capitalizes on how little time a customer might have and how observant they are. This is economically inefficient for already hard-hit consumers.

A lot of the time, shrinkflation disproportionately affects consumers with lower disposable incomes and existing food insecurity, as the items in question are everyday products in the average person’s weekly shop. Consumers could switch to other brands or value products but will still often fall victim to the rampant inflation tearing through the economy.  Companies must be more open about downsizing their products so the rising cost of living can be more accurately presented to consumers. Inflation can mean that goods are both smaller and more expensive, putting a two-pronged squeeze on household budgets that shoppers can no longer afford to ignore.